China: Trade Marks In China: A New Balance

There was a time when companies were sceptical about IP
protection in China, with the general impression being that the law
was heavily weighted in favour of local companies, some of whom
seemed to make a habit of hijacking foreign brands. But things have
changed considerably over the past few years, and a recent trade
mark development should further persuade African businesses that
their IP rights, and particularly their trade marks, will be
properly protected in China.

According to the publication The Trademark Lawyer, a
Chinese court has recently ordered three Chinese companies to pay
shoe manufacturer New Balance damages of USD1.5-million for trade
mark infringement. The company owns a number of trade marks,
including the name New Balance, but this case related to a logo
mark, the slanting N Logo. New Balance sued three Chinese companies
– Zheng Chaozhong, Xin Ping Heng Sporting Goods Limited Co,
and Bo Si Da Ke Trading Limited – which seemingly all used a
very similar logo in relation to shoes sold under the name New
Boon. The Suzhou Intermediate People's Court found for New
Balance, and spoke of the fact that the local companies had
"seized market share" from New Balance, and
"drastically damaged the business reputation" of the
company. It's the damages award that's the most
eye-catching, however. Although Chinese courts have not shied away
from damages awards over recent years, this is apparently the
largest damages award that a Chinese court has made in a trade mark
infringement case involving a foreign trade mark owner.

Damages awards tend to get trade mark lawyers excited, because
in some countries damages awards for trade mark infringement are
rare. That's because it can be very difficult to establish
exactly what financial loss has been suffered – for example,
in Mauritius and South Africa, a court will award an interdict
(injunction) where there has been an infringement, but when it
comes to the financial side, it's more likely to order a
separate inquiry into damages (something that seldom actually
happens) than make a damages award. But Chinese trade mark law was
amended a few years back to make it easier for courts to award
damages, including triple damages in cases where there is bad
faith, and penalties of up to 500% of the profits earned from the
infringement.

Given the importance of China as a destination for African
companies – both as a market and as a source of manufacture
– we have written about Chinese trade mark law on a number of
occasions. Over the past few years, we have tracked a steady
improvement. For example, we've reported on how the
company 3M persuaded a Chinese court (and an appeal court) that
a Chinese company, Changzhou Huawei Advanced Material Co Ltd
(Huawei), had infringed the trade mark 3M by using the trade mark
3N. The court ordered the Chinese company to pay damages, after
taking account of certain aggravating factors: the infringement had
been going on for many years, it had resulted in huge profits, and
the Chinese company had been very reluctant to disclose financial
records.

We've reported on how the
Scotch Whisky Association successfully sued two Chinese
companies – Shanghai Make Lipu Wine Co Ltd and Qingdao Make
Lipu Co Ltd – for infringing a collective trade mark
registration that it has for the term Scotch Whisky in class 33 for
whisky – the two companies were using the term on products
that did not originate in Scotland. Once again, the court ordered
the payment of damages. The Chinese companies took the case on
appeal, but the appeal court upheld the first court's
finding.

Chinese trade mark law has been improved in many ways of late.
Besides the issue of damages for infringement, there was a
significant development a few years back when the authorities
tackled some of the problems caused by the first-to-file system, a
system that says the first company to file an application to
register a trade mark owns it. This was mitigated by requiring good
faith when it comes to filing a trade mark application, and by
introducing penalties for lawyers who act in bad faith. A further
improvement was the introduction of multi-class filing; in other
words, a system whereby a number of classes of goods or services
can be covered in a single application, something that leads to
cost savings. A third improvement was the requirement for the
registry to deal with trade mark applications within a period of
nine months, thus speeding up the registration process. As a result
of these changes, foreign companies now file huge numbers of trade
mark applications in China. And, as a result of a concerted effort
to promote IP by the Chinese authorities, Chinese companies file
vast numbers of trade mark applications, both in China and
abroad.

The trade mark landscape in China is looking a lot less hostile
than it once did.

Reviewed by Gaelyn Scott, director and head of
ENSafrica's IP department.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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